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31m ago

Fed Poised for Quarter-Point Cut, Signals Scrutiny as Long Yields Rise

Markets expect a 25-basis-point move with guidance likely to raise the bar for additional easing.

Image
A window cleaner works next to Japan's Nikkei stock prices quotation board at a building in Tokyo, Japan February 19, 2024. REUTERS/Issei Kato
Renovations continue at the Federal Reserve Board building in Washington, D.C., U.S., November 14, 2025. REUTERS/Elizabeth Frantz/
The Federal Reserve building in Washington, D.C., U.S., September 16, 2025. REUTERS/Aaron Schwartz/File Photo

Overview

  • Futures put high odds on a third straight 25-basis-point reduction on Dec. 10, with analysts flagging a potential 'hawkish cut' and an unusually divided FOMC.
  • Long-dated Treasury yields sit at multi‑month highs even as policy eases, reflecting a higher term premium and caution around inflation and fiscal risks.
  • Swaps and futures now price a milder 2026 path, with fewer cuts than a week ago and a higher implied terminal rate, while investors focus on the new dot plot and Powell’s press conference.
  • The RBA held its cash rate at 3.60% and warned inflation risks have tilted upward, leaving the Aussie little changed as markets price the next move as a hike in 2026.
  • Political and data uncertainties cloud the outlook, with President Trump seen close to naming Kevin Hassett as Powell’s successor and key U.S. jobs and inflation reports delayed by the shutdown.